Govt proposes to fasttrack insolvency resolution process for start-ups, small companies; seeks comments

New Delhi, Apr 24 (KNN) The Insolvency and Bankruptcy Board of India (IBBI) has sought comments from public on the draft regulations for Fast Track Insolvency Resolution of Corporate Persons.

Under the draft IBBI, government plans to put in place a fast track resolution process for start-ups and small companies under the Insolvency and Bankruptcy Code.

The draft aims at providing a faster exit mechanism for certain class of entities.

Under the draft, the proposal is to fasttrack the insolvency resolution process for three classes of entities— start-ups, small companies and companies or limited liability partnerships (LLPs).

Comments have been sought from the public till 8 May on the draft IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017.

The Ministry of Corporate Affairs had set up four Working Groups to facilitate implementation of the Insolvency and Bankruptcy Code, 2016. The Working Group 3 had a mandate to deliberate and submit its recommendations on rules and regulations and other related matters for the insolvency and liquidation process under the Insolvency and Bankruptcy Code, 2016. This Working Group has submitted draft regulations for Fast Track Insolvency Resolution of Corporate Persons. 

As per the draft norms, a company or LLP which has not borrowed more than Rs2 crore in any manner will be eligible for the process fasttrack. While the draft norms do not spell out the timeframe for a fasttrack process under the Code, it is expected to be 90 days.

The Code provides for completing insolvency resolution process within 180 days and the timeframe starts from the insolvency commencement date. It seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.